What Triggers Forced Liquidation?
Forced liquidation occurs when your position losses exceed your available margin balance. Each futures contract has a minimum margin requirement called the "maintenance margin." When your margin balance falls to or below this threshold, the system initiates liquidation.
The Liquidation Process Explained
- The system takes over your position and remaining margin, attempting to close it at the bankruptcy price.
- If unsuccessful, the BTSE Futures Insurance Fund adjusts the order price to improve execution chances.
- If still unresolved, Auto-Deleveraging (ADL) activates, matching your position with profitable counter-traders based on leverage and profit margins.
How Liquidation Prices Are Determined
The system displays a liquidation price for each position. When the mark price (a weighted average price resistant to manipulation) reaches this threshold, your margin can no longer cover the maintenance requirement, triggering liquidation.
👉 Learn how to calculate liquidation prices
4 Strategies to Avoid Liquidation
- Monitor Maintenance Margins: BTC contracts require 0.5% maintenance margin vs. 4.5% for USDT contracts. Adjust leverage accordingly.
- Top Up Margin: Deposit additional funds when mark prices approach liquidation levels.
- Set Stop-Loss Orders: Predetermine exit points to manually close positions before liquidation.
- Isolate Risk Capital: Only allocate funds you're willing to lose to margin wallets.
Margin Calculation Formulas
Initial Margin
Initial Margin = Mark Price × Position Size × Contract Multiplier × Initial Margin%Example: For 100 BTC contracts at $9,001 mark price with 0.001 multiplier and 1% initial margin:
$9,001 × 100 × 0.001 × 1% = $9.001Maintenance Margin
Maintenance Margin = Mark Price × Position Size × Contract Multiplier × Maintenance Margin%Example: Same contract with 0.5% maintenance margin:
$8,800 × 100 × 0.001 × 0.5% = $4.40Liquidation Price Estimation
For long positions:
Liquidation Price = Entry Price - (Available Loss / (Position Size × Contract Multiplier))Where Available Loss = Margin Balance + PnL - Maintenance Margin - Fees
Calculation Example:
- Available Loss: $3,000 + (-$1,000) - $295 - $35.4 - $5.9 = $1,663.7
- Per-Coin Loss Allowance: $1,663.7 / (1,000 × 0.001) = $1,663.7
- Liquidation Price: $60,000 - $1,663.7 = $58,336.3
Leverage Comparison Table
| Leverage | Risk Buffer |
|---|---|
| 100x | <0.5% |
| 1x | ~99.5% |
Lower leverage significantly improves risk tolerance. We recommend carefully assessing your risk capacity before selecting leverage levels.
👉 Master risk management strategies
FAQ
Q: Can I recover funds after liquidation?
A: No, liquidated positions are irreversibly closed by the system.
Q: How often does mark price update?
A: BTSE updates mark prices in real-time using data from major exchanges.
Q: Does insurance fund guarantee no losses?
A: No, it only improves liquidation execution—there's still risk of partial loss.
Q: Why does ADL target profitable traders?
A: This ensures the most capable parties absorb losses, maintaining market stability.
Q: Can I change leverage after opening a position?
A: Yes, but this will recalculate your liquidation price and margin requirements.
Q: Are fees included in liquidation calculations?
A: Yes, the system deducts estimated fees when determining available margin.